Archive for August, 2010|Monthly archive page

The Bull has yet get a grip as the gravity of the Bear keeps it in check.

Lackluster action hasn’t given us much a trend to buy into. As price action on the major indexes remains below major moving averages we’re in no position to think the upside of this market is the path of least resistance.

However, it’s often a mistake to short a dull market. While the strength of the Bull is iffy, we’re holding a Buyer’s Caution bias, or Yellow Flag, for lack of more conviction among Bears.

As the S&P 500 tests its 50-day moving average we don’t want to lose sight of the fact that as long as action remains below the 200-day the market need to do more to convince us that it might be a bull.

We’re holding a Buyer’s Caution bias, which basically is a neutral stance for us that respects the market’s general leaning toward upward drift.

In order for us to upgrade to Buyer’s Edge, we need to see more dominant buying in conjunction with leading stocks hitting new highs.

In order for us to downgrade to Seller’s Edge we want to see that opposite.

The prospects of a Bull market stay alive as the major indexes hold above their 200-day moving averages.

Tuesday’s modest sell-off rang few alarms with the exception of Distribution for semiconductors (SMH) and retail (RTH.)

We might expect a quiet summer week if it weren’t for Employment Data to be released Friday. With the prospects of a double-dip recession haunting economists, this report might be especially sensitive for the market.

Our main concern going forward for this current rally is a crowd of eager sellers waiting to recoup losses over the past few months. In technical terms, this is called overhead resistance.

The key mark we’re using to monitor the trend is the 20o-day averages. Unless we see institutional-grade funds unwinding positions, we’re likely to become bigger believers that up is the path of least resistance.